The sale of the city's 12 affordable housing complexes would reap $143 million in profit.
However, the City Council is unhappy that some nonprofit groups won't see any of that cash.
The city's managing director says it's too late for the council to insert itself into the deal with Honolulu Affordable Housing Partners.
The city used a selection committee to pick which projects to fund with the affordable housing sale.
But, a resolution that would cancel the sale and allow the council to select projects on its own is a problem, according to Housing and Urban Development official Mark Chandler.
"What we're back to is back eight years ago when we came back to the city council. Back then, telling you guy you're inserting yourself into the project selection process," said Chandler.
One of the projects the affordable housing sale will fund is Housing First, which seeks to find homes for the chronically homeless while addressing issues like drug abuse and alcoholism later.
The mayor's administration says the council must allow the affordable housing sale to go through or risk not meeting a HUD deadline next Monday to submit an action plan for Community Development Block Grants.
"It delays us every step of the way for another 30 days every time we move," said Community Services Director Pamela Witty-Oakland.
On Tuesday, Honolulu Affordable Housing Partners, which inked a deal with former mayor Peter Carlisle in 2012 to buy the city's affordable housing complexes, issued a letter to the city saying it may lose $2.5 million because of the council's proposed action.
"As a result of that, their ability to proceed and retaining financing has been jeopardized," said City Managing Director Ember Shinn.
In the end, the council agreed to allow the selection process that was previously planned move forward. However, Council Chair Ernie Martin lashed out at the mayor for last-minute brinkmanship.
"It's been consistently that the administration has submitted responses to the council's request for information at a very late date, and, in fact, on the floor while the council is considering this motion," said Martin. "Very unprofessional from my perspective."
The administration insists the council was kept in the loop about the affordable housing sale and how proceeds would be spent.
A spokesperson for Honolulu Mayor Kirk Caldwell says it's the council that failed to tell the mayor it was considering cancelling the sale.